TESTO INTEGRALE - Moody's taglia rating Italia a A2, outlook negativo

MILANO, 4 ottobre (Reuters) - Frankfurt am Main, October 04,
2011 -- Moody's Investors Service has today downgraded Italy's
government bond ratings to A2 with a negative outlook from Aa2,
while affirming its short-term ratings at Prime-1. The rating
action concludes the review for downgrade initiated by Moody's
on 17
June, 2011.

The main drivers that prompted the rating downgrade are:

(1) The material increase in long-term funding risks for
euro area sovereigns with high levels of public debt, such as
Italy, as a result of the sustained and non-cyclical erosion of
confidence in the wholesale finance environment for euro
sovereigns, due to the current sovereign debt crisis.

(2) The increased downside risks to economic growth due to
macroeconomic structural weaknesses and a weakening global
outlook.

(3) The implementation risks and time needed to achieve the
government's fiscal consolidation targets to reverse the adverse
trend observed in the public debt, due to economic and political
uncertainties.

The downgrade reflects the weight of these growing risks
relative to some positive credit attributes. These include a
lack of significant imbalances in the economy or severe pressure
on private financial and non-financial sector balance sheets, as
well as the actions undertaken by the government over the
summer. Moody's notes that the size of the rating action is
largely driven by the sustained increase in the country's
susceptibility to financial shocks due to a structural shift in
market sentiment regarding euro-area countries with high debt
burdens. A country's susceptibility to shocks is a key factor
under Moody's sovereign methodology.

The negative outlook reflects ongoing economic and financial
risks in Italy and in the euro area. The uncertain market
environment and therisk of further deterioration in investor
sentiment could constrain the country's access to the public
debt markets. If such risks were to materialise and the
long-term availability of external sources of liquidity support
were to remain uncertain, the country's rating could transition
to substantially lower rating levels.

RATIONALE FOR DOWNGRADE

The downgrade stems from three closely related drivers:

1) The fragile market sentiment that continues to surround
euro area sovereigns with high levels of debt implies materially
increased financing costs and funding risks for Italy. The
country is a frequent issuer with refinancing needs of more than
EUR200 billion in 2012.

Although future policy actions within the euro area could
reduce investors' concerns and stabilise funding markets, the
opposite is also increasingly possible. Even if policy actions
were to succeed in the short term in returning some degree of
normality to euro area sovereign debt markets, the underlying
fragility and loss of confidence is deep and likely to be
sustained.

As indicated by the A2 rating, the risk of
default by Italy remains remote. Nonetheless, Moody's believes
that the structural shift in sentiment in the euro area funding
market implies increased vulnerability of this country to loss
of market access at affordable rates that is incompatible with a
'Aa' rating. Moreover, the preponderance of downside risks and
the potential for rapid rating transition which those risks
imply are not compatible with a rating at the top end of the 'A'
range. The repositioning of Italy's government bond rating to A2
reflects Moody's judgment of the balance of long-term
risks facing the Italian sovereign. It is consistent with
Moody's broader reassessment of sovereign risk in the euro area,
focusing on member countries that are more susceptible to
confidence-related shocks due to high public debt exposure
and/or large fiscal imbalances.

2) The Italian economy continues to face significant
challenges due to structural economic weaknesses. These problems
-- mainly low productivity and important labour and product
market rigidities -- have been an impediment to the achievement
of higher potential growth rates over the past decade and
continue to hinder the economy's recovery from
the severe recession it experienced in 2009. These structural
impediments to economic growth cannot be removed quickly. The
government's reform plans have only just started to address some
of these structural challenges, and they need to be implemented
efficiently. Moreover, moderate medium-term growth prospects for
the Italian economy have been further revised downwards due to
potential adverse effects of a weakening
European and global growth outlook. Economic growth will be a
crucial factor determining the government's revenues, the
achievement of fiscal consolidation targets and, ultimately, its
debt trajectory.

3) Finally, there is increasing uncertainty for the
government to achieve fiscal consolidation targets. Since more
than half of the consolidation measures are based on government
revenue growth, the plans are vulnerable to the high level of
uncertainty around economic growth in Italy and elsewhere in the
EU. Moreover, political consensus on additional
expenditure cuts can be difficult to achieve. As a consequence,
the government may find it challenging to generate the primary
surpluses that are needed to place the public debt-to-GDP ratio
and the interest burden on a solid downward trend. Moody's
expects Italy's public debt-to-GDP ratio to reach 120% at the
end of this year, up from 104% at the start of the global
crisis. As well as posing a risk to Italy's financial
strength, which is a key consideration under Moody's sovereign
methodology, failure to achieve fiscal and debt targets could
increase the country's susceptibility to financial market
shocks.